Bengaluru: Stayzilla co-founder Yogendra Vasupal, who was arrested in March by local authorities in Chennai on charges of defrauding an advertising agency, has been granted conditional bail by the Madras high court, according to two people aware of the development.

The Madras high court on Tuesday set the bail amount at Rs40 lakh. The amount was set after Jigsaw Advertising expressed doubts about Vasupal’s ability to repay dues owed to the agency by Stayzilla. Jigsaw has claimed that Stayzilla owes it around Rs1.7 crore.

Mint could not immediately verify other details of the court order. According to media reports, high court judge S. Baskaran termed the case “a dispute between two businessmen”.

Vasupal and the other founders at Stayzilla could not be immediately reached for comment.

Sharad Sharma, an angel investor and co-founder of product software think-tank iSpirt, said the development was heartening but the fallout of the case would become apparent only with time.

“This was essentially an invoice dispute. Stayzilla had offered arbitration but the other side chose to intimidate. Yogi (Vasupal) was not willing to be intimidated. Now, if this case is disposed of in a way people who did that intimidation learn that those methods won’t work, then fewer people will take that route,” said Sharma.

In March, Vasupal was abruptly taken into custody by local authorities after Jigsaw Advertising filed a complaint against the founders of the now-defunct online homestay venture, causing widespread outcry in the Indian start-up ecosystem against the arrest, with prominent investors, founders and other stakeholders in the community rallying around Vasupal.

In the complaint and an email to Mint at the time, Jigsaw had accused Stayzilla’s founders of committing fraud, including embezzlement of funds.

In February, Stayzilla had said that it was shutting down because of an unviable business model. The start-up counted Matrix Partners and Nexus Venture Partners among its investors.

“I would like to announce today that we would be bringing to a halt the operations of Stayzilla in its current form, and looking to reboot it with a different business model. This has been one of the toughest decisions that I have taken so far but it is the right thing to do,” Vasupal had said in a Medium post on 23 February.